Increasing the interest rate to 5%, is this really the fairest way to slow inflation?

Dinahmo

growstuff

GrannyGravy13

growstuff one of the reasons we delayed getting married was whilst we were single despite living together and a joint mortgage we both were able to claim miras

I didn't realise that. Maybe if I had, we would have delayed getting married.

I can remember advising clients not to get married for that very reason.

We didn't have a joint mortgage until we got married in 1986, so I guess we didn't miss much, but I'm pretty sure we weren't told. Before then, the mortgage was in my name alone.

Successive governments have encouraged people to buy and been a catalyst for the current high prices.

Dinahmo

Some reasons for the massive increases in house prices that have taken place since Thatcher came into power:

1. Increase in MIRAS from £25k to £30k in the 1983 Budget.

2. Unmarried couples could pool their allowances to £60k.

3. Lawson's announcement in the March 1988 Budget that the above would cease in August 1988 caused a rush to beat the deadline and lead to a sharp increase in house prices. Lawson publicly regretted that he had not removed the option as from the Budget Day.

4. Regular periods of gazumping.

5. Large rises in 2000 - rising prices encouraged banks to lend. More bank lending encouraged increases in house prices.

6. Help to buy scheme. It was possible to borrow 20% of a house price interest free (40% in London). Buyers had to find a 5% deposit and the house must be a new build.

7. Stamp duty holiday- July 2020 the govt announced a stamp duty holiday until June 2021. Buyers would not pay any duty on the first £500k of a house purchase. £1.3 million people took advantage of this leading to a further increase in house prices. First time buyers are still exempt if the property price is under £500k.

8. Finally I would add that the low interest rates that have obtained between 1995 and 2022 have encouraged buyers to spend as much as possible on their house without realising that interest rates could go up.

Dianhmo, Finally I would add that the low interest rates that have obtained between 1995 and 2022 have encouraged buyers to spend as much as possible on their house without realising that interest rates could go up.

Not allowing for rate changes, I'd guess this is much of the problem now.

Most people need a little luxury in their lives to help them through the bad times. For many women it's a new lipstick is important. Here's a link to a Guardian article last year about the "lipstick effect"

www.theguardian.com/business/2022/oct/14/lipstick-effect-britons--luxuries-cost-of-living-crisis

Grantanow

I don't think much came out of Hunt's meeting with lenders apart from credit ratings being unaffected for those with repayment problems and a deferral of repossession by 12 months. Most lenders will be flexible up to a point but repayment holidays, part payment etc., simply defer the debt.

Of course they do but it may help people to stay in their homes.

growstuff

GrannyGravy13

growstuff one of the reasons we delayed getting married was whilst we were single despite living together and a joint mortgage we both were able to claim miras

I didn't realise that. Maybe if I had, we would have delayed getting married.

I can remember advising clients not to get married for that very reason.

That makes sense Norah.

Some reasons for the massive increases in house prices that have taken place since Thatcher came into power:

1. Increase in MIRAS from £25k to £30k in the 1983 Budget.

2. Unmarried couples could pool their allowances to £60k.

3. Lawson's announcement in the March 1988 Budget that the above would cease in August 1988 caused a rush to beat the deadline and lead to a sharp increase in house prices. Lawson publicly regretted that he had not removed the option as from the Budget Day.

4. Regular periods of gazumping.

5. Large rises in 2000 - rising prices encouraged banks to lend. More bank lending encouraged increases in house prices.

6. Help to buy scheme. It was possible to borrow 20% of a house price interest free (40% in London). Buyers had to find a 5% deposit and the house must be a new build.

7. Stamp duty holiday- July 2020 the govt announced a stamp duty holiday until June 2021. Buyers would not pay any duty on the first £500k of a house purchase. £1.3 million people took advantage of this leading to a further increase in house prices. First time buyers are still exempt if the property price is under £500k.

8. Finally I would add that the low interest rates that have obtained between 1995 and 2022 have encouraged buyers to spend as much as possible on their house without realising that interest rates could go up.

Hard of hearing?

Smileless2012

Did she give any information on what this rescue plan would consist of GrannyGravy? Hope your finger's a little better.

I believe I heard their plan could include "forcing" banks to offer support to borrowers. Perhaps allowing them to move on to interest-only mortgages, extending their repayment period.

Har

Germanshepherdsmum

You trying to be clever growstuff?

Pardon?

MaizieD And it will do nothing for inflation, because our current inflation is not being caused by too much money swilling around in the economy. I don't understand how people don't understand this.

People don't agree with you, simple really.

Germanshepherdsmum

I don’t frequent beauty salons GG, but I remember the trouble when a local so-called beauty therapist was sued. She had no insurance and went bankrupt. As I said, the industry is largely unregulated so I would consider the certificates on the wall pretty worthless.

They have a public liability insurance certificate displayed at the one I use, is that worthless? The competency certificates are usually NVQ or City and Guilds, which are recognised bodies, so I think they hold some credibility.
I can see if you used a self employed therapist visiting your home there could be issues, but the survival of beauty salons rests on their reputation and they only employ competent, qualified people in my experience.

Germanshepherdsmum

What more do you expect?

I expect the BoE to stop needlessly putting up the interest rate.

They're like the doctors who refused to give up bloodletting, despite proof it didn't work and tended to hasten the patient's death.

Did she give any information on what this rescue plan would consist of GrannyGravy? Hope your finger's a little better.

The beauty industry is largely unregulated and many who work in it do no more than attend a very short course which produces a fancy certificate to display - and I doubt many are insured.

You're off on your DM rhetoric again, GSM. How do you know that what you are claiming is true? Do you have data to prove it?

What more do you expect?

I don't think much came out of Hunt's meeting with lenders apart from credit ratings being unaffected for those with repayment problems and a deferral of repossession by 12 months. Most lenders will be flexible up to a point but repayment holidays, part payment etc., simply defer the debt.

GrannyGravy13

Excuse my musings if the banks put up interest rates on savings accounts and ISA’s more people would lock their money away for a 1/2/3 or even a 5 year period which would take money out of circulation which under normal circumstances would help bring down inflation.

Unfortunately inflation is being driven by more external factors than supply and demand, but every action would help.

Inflation is being driven by external supply shocks, and now, the BoE raising interest rates.

People saving their money instead of spending, it seems to me, will just result in putting companies out of business, though I have seen it argued that they might reduce prices in order to get people buying.

Saving instead of spending doesn't appear to me be helpful at all.

But, how long could they sustain that for? Particularly if they are having to pay increased charges on loans and rentals.

And it will do nothing for inflation, because our current inflation is not being caused by too much money swilling around in the economy. I don't understand how people don't understand this.

I don’t frequent beauty salons GG, but I remember the trouble when a local so-called beauty therapist was sued. She had no insurance and went bankrupt. As I said, the industry is largely unregulated so I would consider the certificates on the wall pretty worthless.

GrannyGravy13

Germanshepherdsmum

The beauty industry is largely unregulated and many who work in it do no more than attend a very short course which produces a fancy certificate to display - and I doubt many are insured.
No, people don’t have a right to work in their trade or profession of choice if no jobs are available and the alternative is being paid benefits courtesy of the taxpayer.

No idea what beauty establishments you frequent GSM

Even the Chinese/Vietnamese nail shops have to have third party liability insurance and regular checks.

I was thinking that, most beauty therapists I’ve used have done at least two years at college, and have walls covered in the certificates they have gained for specific procedures.

It amazes me that people think it’s fine to force other people into jobs they have less interest and skills in than what they do now. I’d ask myself how would I like that if it was my son or daughter, having been to university and working in their chosen professions, if they were told we don’t need you in that job now, you’re going to work in a factory, or become a carer. They would be miserable.

Germanshepherdsmum

The beauty industry is largely unregulated and many who work in it do no more than attend a very short course which produces a fancy certificate to display - and I doubt many are insured.
No, people don’t have a right to work in their trade or profession of choice if no jobs are available and the alternative is being paid benefits courtesy of the taxpayer.

No idea what beauty establishments you frequent GSM

Even the Chinese/Vietnamese nail shops have to have third party liability insurance and regular checks.

Katie59

growstuff

Germanshepherdsmum

I agree Katie. There is much that could be cut back on, as you have already said. People have to choose between keeping a roof over their heads and having the latest phone, takeaways and ready meals. I’m sure we have all had to make choices to pay the bills.

So what happens to all the people who produce and sell the goods/services you deem non-essential?

We bring in less overseas workers, it’s as simple as that, maybe we do prefer to work flipping burgers, delivering pizzas, or varnishing nails but it’s not essential there is plenty of essential work to be done.

Which of these essential jobs which nobody else wants to do are you volunteering yourself and your family to do Katie59? That sounds very much like ‘I’m alright Jack’.

You trying to be clever growstuff?

The beauty industry is largely unregulated and many who work in it do no more than attend a very short course which produces a fancy certificate to display - and I doubt many are insured.
No, people don’t have a right to work in their trade or profession of choice if no jobs are available and the alternative is being paid benefits courtesy of the taxpayer.